Factors Influencing Foreign Direct Investment of South African Telecommunications Firms in Sub- Saharan Africa
Date
2012-01-23
Authors
Stephan, Henry
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Abstract
The study investigates the main factors considered by South African telecommunications firms when making a decision to undertake Foreign Direct Investment (FDI) into Sub-Saharan Africa (SSA). This encompasses the reasons for investing, the methods of entry into the identified market and the factors influencing their decision to perform Foreign Direct Investment (FDI). By using this study as a reference and guide South African telecommunications firms, which are considering investing in SSA, will be able to make informed decisions whether to perform FDI in a country or not. Secondly, it will also provide a potential host country in SSA with a view of those factors that, if improved and made more attractive, would create interest from as well as attract FDI from South African telecommunications firms. A survey questionnaire was developed and sent to participants identified in telecommunication firms. These companies together represent more than 70% of the revenue generated by telecommunications firms, in SSA. Their inputs were collated and the results were used to compile this study. The research revealed that market size, regulatory environment and government policy were the three most important factors influencing the decision to perform FDI. The golden thread which emerged as a strategy was to build relationships with government and influence them through negotiation, training (knowledge building) and being sensitive to the needs of the people of the country. Joint Venture (JV), with a majority shareholding, is the preferred entry channel and the main reason is that the investing companies then have management control and can dictate policy and direction. The main reasons for deciding to enter into a country in SSA are for market growth and profit growth due to saturation in the existing market, as well as for diversification of risk. South African telecommunications firms wishing to enter into SSA must be prepared for an unstable and uncertain policy environment and understand that the cost of starting a new venture in SSA is high. These risk factors can be overcome by ensuring that the correct management teams are in place, and that they understand the SSA environment and are prepared to build relationships with Government
Description
MBA thesis - WBS
Keywords
Foreign direct investment - South Africa, Telecommunications